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Ichor: That Momentum Faded Quickly

May 05, 2020 8:48 PM ETIchor Holdings, Ltd. (ICHR)2 Comments


  • Ichor is rapidly seeing operating momentum come to an end due to the COVID-19 outbreak.
  • The outbreak caused a big sell-off and despite a 50% recovery from the lows, shares are down 40% from the highs.
  • Appeal is increasing, yet the near-term outlook remains dismal.
  • Holding 50% of my target position, I feel no urge to buy in the low-$20s, although a re-test of levels in the mid-teens might prompt me to double up on the position again.
  • Looking for more stock ideas like this one? Get them exclusively at Value In Corporate Events. Get started today »

Late January I looked at Ichor Holdings (NASDAQ:ICHR) as I concluded that momentum has returned. I concluded that the company was delivering on impressive sequential growth as the underlying results fueled momentum in the share price, which made that I was happy to take some profits after shares nearly doubled in the 18 months. Ever since we have been in for a true shock as shares lost nearly half their value in response to the COVID-19 outbreak.

The Moves, A Roller Coaster

Having gone public at just $9 per share late 2016, Ichor was almost an instant success with shares tripling to levels in their $30s in 2017 as the cyclicality of the business caused shares to end 2018 around the $15-mark.

The cyclicality is the direct result of the activities of Ichor as it is a provider of subsystems, used in the process of manufacturing semiconductor chips, as in fact this is quite a specialized task. This specific activity and desire to remain lean make that many semiconductor manufacturers have outsourced this task. Given this and the fact that this is a cyclical industry, companies like Ichor come to fill in the blanks.

At the time of the IPO the company was largely reliant on Lam Research (LRCX) and Applied Materials (AMAT) which combined were responsible for pretty much all sales reported by Ichor at the time.

Some Trends

In the year 2016, the year in which the company went public, Ichor generated $406 million in sales on which it reported operating margins of 6%. For the year thereafter, revenues grew to $656 million as margins improved to 7%, as growth was in part driven by two acquisitions which came at a price tag of around $180 million. The company reported earnings of $2 per share in 2017 on a GAAP basis, with adjusted earnings about half a dollar higher.

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This article was written by

The Value Investor profile picture
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

Analyst’s Disclosure: I am/we are long ICHR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (2)

Lifted this from a link shown in a comment made today following an mu article.

"...non-face-to-face activities increased amid the spread of the COVID-19 virus. Server demand increased thanks to telecommuting and online classes."

I dunno 'bout fading, got into the first page of the cc: only so far and noted these below. I'll be back whenever i finish reading the transcript, whenever that'll be, or for any alerts on other comments posted here in the meantime. You write your article before the er or had you seen the er before you wrote the article? I haven't gone through all your article, either, wanted to post so i'll be alerted to any comments that come in here. Ciao

"In each of the countries in which we operate, we have been designated an essential business supporting the critical infrastructure IT industry, which allows us to operate.
Our supply chain is strong...We have built a strong inventory position in order to continue to support the strong level of demand from our customers.
In general, the demand for semiconductor equipment remains strong and has not changed much over the course of the last quarter. We are seeing increased demand from each of our largest customers and across all of our businesses,..."
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